Budget Resolutions and Economic Situation

Kevin Hollinrake Excerpts

Tuesday 14th July 2015 Commons Chamber

[Rachael Maskell (York Central) (Lab/Co-op)]

It is a pleasure to follow my hon. Friend the Member for Swansea West (Geraint Davies). I congratulate the new Members on making their excellent speeches, particularly the hon. Member for Paisley and Renfrewshire South (Mhairi Black), who drew on the wise words of the late Member for Chesterfield, who is a political hero of mine, too.

At the weekend in York, I talked to local businesses, our public services and those who support the poorest in our community. There were no cries of “Fantastic!” for the Budget—quite the reverse. Those are the people who will live with the consequences of what the Budget creates.

Three themes stand out from my conversations, but they were all left out by the Chancellor, who is more set on driving down our public services and our public sector workers, who, we must remember, have already had a 15% cut to their pay, than he is set on driving up exports and the prospects of so many who are left to flounder as they are stripped of essential resources to help them get by each week. The first theme was generating productivity and good-quality, high-skilled jobs; the second was strengthening public services; and the third was addressing the shameful inequality in our nation that the cuts to 30 million people will increase, and addressing the staggering nearly £2 trillion of personal debt that is being built up.

Today, I will focus on productivity. Unless we grow our productivity—our base—the long-term poverty in our country will be sustained. It is therefore not an either/or strategy, but both. We need to address inequality and to drive up our economy: investment now for future growth.

Obviously, there was deep concern at what came out last week not just in the Budget, but in the productivity plan, which should fix the foundations to create a more prosperous nation. I took the plan and put it through what I call the York test. I asked how the plan would drive the economy in the city I represent, a northern city that is so much at the centre of rhetoric at the moment.

York has so much potential. It could have high-quality, well-paid jobs, and with the considered interconnectivity of a productivity plan we could recreate the city as an engine in the north. I read in the plan lots of suggestions to bring together experts to write a strategy for productivity. If there are many gaps in the road map, having experts come together can help to grow the economy for the future, but time is wasted as we wait for the plan to be developed.

One of the loudest cries that I hear from my constituents —but it is not in the plan—is the need to address the needs of small businesses in York. They desperately want business rates to be addressed, so that our local entrepreneurs and business leaders can confidently build a sustainable employment strategy in the light of the ridiculously high cost of premises—another issue that must be addressed.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Does the hon. Lady welcome the 75% reduction in unemployment in York since 2010, and the 45% reduction in 2014?

[Rachael Maskell]

I do not accept that those are the high-quality, highly skilled jobs that are so important for growing our economy. In fact, many jobs in York are now zero-hours contracts in the tourism industry, retail and other trades, and the number of people on the minimum wage is a real concern.

While the apprenticeship levy sounds good—I will examine the initiative as it makes progress, in particular to ensure that the apprenticeships are of high quality and not just learning experiences for people in work—we need to view that alongside the cuts in education. York college has experienced a 24% cut in funding for adult courses. Those cuts are in direct conflict with the warm words about supporting a technical curriculum. The small print of the plan also includes higher and higher tuition fees, at the same time as the removal of the maintenance grant—money that people will be expected to pay themselves. Those are disincentives for people to engage in education in the future, so the plan fails the York test on skills.

It is a scandal that the links between education and work have been severed in this country. In schools, colleges and universities, courses do not lead directly to high-quality, good jobs. Education is often in one silo and work in another, and the bridges have not been built between the two. How is it that someone can spend £50,000 on their development to end up in a zero-hours job or having to volunteer to get the necessary experience to get a decent job—experiences that a couple of people reported to me over the weekend? When people embark on a course, we want to see a guaranteed good-quality job at the end of it—a student to job guarantee. That is the sort of initiative that I expected in the Budget last Wednesday to kick-start careers and growth, and to start to help to clear up student debt, which is a scandal in itself, but one for a separate debate.

When I looked at the productivity plan, I had to ask, “Where is the manufacturing strategy?” I could not find it and I did not hear it in the Budget—nothing on good-quality, highly skilled jobs. Where was the real opportunity to develop the housing infrastructure—and the construction jobs that would go with that—that we desperately need? The plan talks of a growth in the number of houses of 40,000 a year, but we need at least 200,000—possibly 300,000—a year. Labour had a programme to ensure that by 2020 we would be building 200,000 houses a year. Of course, the OBR and the IFS believe that the right to buy and the cuts in social rent will slash that already under-ambitious building programme. So the productivity plan fails the York test on housing, even though more housing is central to the city’s ability to grow the local economy.

Where was the environmental strategy on retrofits for our businesses, public services and the domestic market, on growth in renewables, and on science and manufacturing? As Labour promised, that would create 1 million more jobs. I am committed to developing a sustainable economy, but the Government’s approach to climate change puts us at further risk of missing our 2050 carbon reduction targets. Not only is there investment in road instead of rail, but the removal of subsidies for onshore wind and the charging of renewable energy users through the climate change levy. This will chase away another potential boom area for our future economy. The Budget fails the York test on sustainability and productivity.

There was nothing in the Budget on upgrading our infrastructure and providing good construction jobs in our schools and hospitals through new build. The state of our schools and hospitals means that this is desperately needed in York. We are seeing a strategy that will not deliver.

I would like to question the Minister more closely on investment in science and research, and on whether any of the money will be coming to our universities to give us the opportunity to ensure that York benefits from good solid jobs by 2020. I would be interested to hear his reply.

Finally, on the northern powerhouse, we have heard much about rail and the northern power cut. York is famed for its rail heritage and the national rail museum. We are at the intersection of the trans-Pennine route and the east coast main line, so we should be the rail hub of the future. We have a real opportunity to grow the northern economy, but that was not in the Budget and that was not in the productivity plan. Will the Minister sit down with me and local MPs to ensure that we have an opportunity to kick-start the economy?

--- Later in debate ---

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

We have had a good debate—today and over the last few sitting days. It is a pleasure to close our Budget deliberations on behalf of the Opposition. I would like to start by congratulating the hon. Members for Kensington (Victoria Borwick), for Paisley and Renfrewshire South (Mhairi Black), for Brecon and Radnorshire (Chris Davies), for Airdrie and Shotts (Neil Gray) and for Linlithgow and East Falkirk (Martyn Day) on making their maiden speeches today. I am sure all Members will join me in wishing them well as they begin their journey of standing up for their constituents in this place.

Last week, the Chancellor delivered his first Budget of this Parliament. Although his rhetoric might have delivered him positive headlines on Thursday morning, the reality is that his Budget will deliver misery and hardship for ordinary working people because it leaves them worse off, penalised for doing the right thing in working and punished for circumstances outside their control. Not only does this Budget penalise people in low-paid work; it fails the test of building a more productive economy, because the Chancellor has either flunked or ducked the big long-term decisions that need to be made on infrastructure.

What ordinary working people in our country needed was a Budget that would make their lives easier, make work pay and help people not just on to the first rung of the work ladder but on to the next one—into better jobs with better prospects and better pay. Instead, the Chancellor focused his energies on his own bid for a better job, better prospects and better pay. Rather than help the working poor to move up, he focused on his own move next door.

The truth that Government Members have to confront is that 3 million working families will bear the brunt of the Chancellor’s £4.5 billion-worth of cuts to tax credits. These cuts will hit working people on middle and lower incomes, completely undermining the Tory argument that this is a Budget for working people. They penalised the very people in work who are trying to do the right thing and who do not earn enough to make ends meet. As I said only a week ago, it is wrong and unfair to remove tax credits from working people without first creating the conditions that would allow it to be done in a way that does not pull the rug from under people on low incomes—by hitting them with what is effectively a hefty work penalty. We all want to see a higher-wage economy, in which people are less reliant on tax credits to make ends meet, but we need to embed higher wages in the economy before we consider going ahead with any changes to tax credits.

[Kevin Hollinrake]

Does the hon. Lady agree with her leader when she said that she should accept the changes to welfare and tax credits contained within this Budget?

[Shabana Mahmood]

That was hardly worth the wait. I have to say that the hon. Gentleman should have been paying attention to what my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman) actually said. She came out very strongly against the whole package of working tax credit changes. If he had listened to my remarks, rather than try to intervene with a Whip’s question, he would have realised that that is exactly what I am doing myself.

The Government will say that they have moved on pay. Again, however, there is a big difference between rhetoric and reality. The Government’s cuts to tax credits overwhelmingly outweigh their measures on pay. I welcome the proposed rises in the national minimum wage, which is still what it is. [Interruption.] I am pleased to see that the Chancellor has joined us. He has failed to explain why raising the minimum wage was so wrong only a few short weeks ago during the general election campaign, in view of our manifesto commitment, or how he came to agree with us so soon after the general election. Nevertheless, imitation is indeed the sincerest form of flattery. We are pleased to observe that the party that forced the last all-night sitting in the House in an attempt to block the introduction of the national minimum wage by the last Labour Government now agrees with us not only that it is important and necessary, but that it should go up. However, we should be clear about the fact that it is not a living wage.

There has always been a difference between the minimum wage and the living wage. Re-badging the new national minimum wage as a living wage will not help the Chancellor, because ordinary working people can see a political con for what it is. The Living Wage Foundation was quick off the mark on Budget day in making that very point. The inconvenient fact for the Chancellor is that the living wage—the real living wage—is calculated on the assumption of a full take-up of tax credits, the very tax credits that the Chancellor has just cut. To make up for the loss of those tax credits, a real living wage would have to be considerably higher than what the Chancellor is now promising working people in Britain.

The new national minimum wage rate of £7.20, when it is introduced next year, will be lower than the current living wage of £7.85. In effect, the Chancellor, who says that he stands with working people, will offer working people in 2016 the 2011 living wage, and we will not let him pretend otherwise. In the end, the simple truth is that the wage increases that are on their way are not enough to make up for the loss of tax credits.

Twenty-four hours after the Chancellor delivered his Budget, the Institute for Fiscal Studies dismissed his claim that increasing the minimum wage would compensate working people. The IFS said:

“the key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of losses that will be experienced by tax credit recipients. That is just arithmetically impossible.”

The IFS also said that the biggest change, which sounded very technical, was the reduction in the work allowance. It explained:

“The work allowance is the amount that a claimant can earn before benefit starts to be withdrawn. Significant allowances were an integral part of the design of UC”

—universal credit—

“intended to give claimants an incentive to move into work. This reform will cost about 3 million families an average of £1,000 a year each. It will reduce the incentive for the first earner in a family to enter work.”

A regressive Budget with a work penalty of £1,000 a year: that is what the Government have delivered to ordinary working people in our country—and while they hit those ordinary working people, they also fail to address a central economic challenge—productivity. That is the puzzle that it is crucial for us to crack and solve, because getting it right is vital if we are to achieve higher living standards, sustained GDP growth, and effective deficit reduction, but this Budget failed the productivity test.